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The Quality of Mandatory Non-Financial (Risk) Disclosures: The Moderating Role of Audit Firm and Partner Characteristics

Author

Listed:
  • Saverio Bozzolan

    (Department of Business and Management, LUISS Guido Carli University, Viale Romania, 32, I-00198 Rome, Italy)

  • Antti Miihkinen

    (Department of Accounting and Finance, Turku School of Economics, FI-20014 University of Turku, Finland3Department of Accounting, School of Business, Aalto University, P.O. Box 21210, FI-00076 Aalto, Finland)

Abstract

Risk disclosures are among the most important types of non-financial information valued by the investors. Risk disclosures are mostly narrative and proprietary in nature; consequently, their accuracy and assurance are highly important to prevent disclosures from becoming boilerplate and losing their relevance. By exploiting the unique features of a setting where risk disclosure is mandatory and under a positive assurance requirement, we investigate whether the quality of audited risk disclosures is associated with the type of audit firm (Big-4 versus non-Big-4), the characteristics of the audit firm, and the attributes of the audit partner. Our results show an association between risk disclosure quality and auditors, but not in the expected ways. After the enforcement of a regulation requiring a detailed description of risks in the Operating and Financial Review (OFR) and a positive assurance of external audit over these disclosures, we do not document any significant Big-4 effect. The quality of risk disclosures is associated with the attributes of the audit partner, namely, familiarity with different client risk disclosures, industry expertise, and gender, independently of an affiliation with a Big-4 audit firm. Along these lines, we extend recent evidence on the audit partner effects in the assurance of non-financial narrative information.

Suggested Citation

  • Saverio Bozzolan & Antti Miihkinen, 2021. "The Quality of Mandatory Non-Financial (Risk) Disclosures: The Moderating Role of Audit Firm and Partner Characteristics," The International Journal of Accounting (TIJA), World Scientific Publishing Co. Pte. Ltd., vol. 56(02), pages 1-55, June.
    • Handle: RePEc:wsi:tijaxx:v:56:y:2021:i:02:n:s1094406021500086
    DOI: 10.1142/S1094406021500086
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    Cited by:

    1. Hosseinniakani, Mahmoud & Overland, Conny & Samani, Niuosha, 2024. "Do key audit matters matter? Correspondence between auditor and management disclosures and the role of audit committees," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 55(C).
    2. Stefania Veltri & Francesco De Luca & Ho‐Tan‐Phat Phan, 2020. "Do investors value companies' mandatory nonfinancial risk disclosure? An empirical analysis of the Italian context after the EU Directive," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2226-2237, September.

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